Saturday, 21 July, 2018


Homeowners preparing to pay more following interest rate hike

Image of USDCAD daily chart Bank Of Canada Raises Key Lending Rate To 1.5%. Here's What That Means For You
Conrad Doyle | 13 July, 2018, 02:01

Royal Bank (RY.TO), TD Canada Trust (TD.TO), BMO (BMO.TO), CIBC (CM.TO), National Bank (NA.TO), and Scotiabank (BNS.TO) all say they will increase their prime rate by a quarter of a percentage point to 3.70 per cent, effective Thursday.

But Mortgages of Canada CEO Samantha Brookes says those with variable-rate mortgages will now face higher interest payments, a concern for many Canadian households that are already saddled with hefty debt loads.

Recent signals from the Bank of Canada governor, combined with strong economic data, have experts widely predicting Poloz will raise his trend-setting rate Wednesday from its current level of 1.25 per cent. Overall, the Bank still expects average growth of close to 2 per cent over 2018-2020.

However, the negative blow of the trade policies recently put in place are to be largely offset by the positives for Canada from higher oil prices, which are above US$73 per barrel, and the stronger USA economy, the bank said.

Another hike this week would come with Canada facing a number of trade-related uncertainties, including NAFTA talks, USA steel and aluminum tariffs and the threat of more duties on the economically critical automotive sector.

The Bank of Canada also has its eye on how widening global trade disputes, including an intensifying battle between the US and China, will affect the world's economy.

It was reasonable to think at the beginning of the year that the unknowns surrounding NAFTA talks could pause business investment and lead to a decline in activity, he said.

The Bank of Canada's quarterly update predicts the economy will show growth in 2019 and 2020, a better outlook than what was forecast in April.

Poloz also signaled he was comfortable with how financial markets were interpreting the central bank's message, noting the hike was "highly anticipated". It also said underlying wage growth has been weaker than what would normally be expected in a tightened job market. It's expected to settle back down to two per cent in the second half of 2019.

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